| MANAMA, June 16
MANAMA, June 16 As with many Gulf-based firms
it's difficult to find a strong dividing line between GFH's
finances and the personal accounts of its senior managers.
GFH began life as a private equity company. Over the years
it created dozens of financial services and real estate
companies (and even a coffee shop chain) that funded each other
and for which it brought in investors that it then charged fees.
One of the largest banks the company created was First
Energy Bank (FEB), for which it raised $1 billion in capital in
2008, mostly from shareholders in Abu Dhabi and Libya. The
company was established to invest in energy projects in the
From the beginning, Esam Janahi held a 10 percent stake in
FEB, which two inside sources have told Reuters he received as a
commission, although that is not substantiated by documents that
Reuters has seen. He sold his stake last October and used the
proceeds to pay back $50 million GFH owed FEB, according to two
bankers with direct knowledge of the transaction.
"Paying back the money from his own pocket was part of the
stake sale agreement from the very beginning," one of the
bankers said. "The central bank and people even higher up (in
the government) wanted him to personally sort out the mess he's
A former employee at a company involved in GFH's many
proposed "energy cities" around the region said they were
opaque. "Esam Janahi has set up many companies, an energy city
here, an energy city there, and they all somehow hold stakes in
each other. It's one big mess," said the source.
Corporate governance at GFH was weak to non-existent,
according to Bahraini bankers and former GFH employees. They say
Janahi was the dominant figure at GFH and information at the
firm was guarded by his small entourage. A former GFH executive
said he only rarely had access to Janahi and this group of
people, which was so isolated that it amounted to a management
team within the official management team.
"We learned about many deals and decisions just by looking
at the screens," the source told Reuters.
Bankers say things were further complicated because GFH
often made investments with firms controlled by Janahi's
brothers. Khalid Abdulla-Janahi was the Chairman of Bahraini
investment firm Ithmaar , before he was demoted by its
main Saudi shareholder in early 2010, after heavy losses and a
Reuters report that revealed financial stress at a Geneva-based
"There were so many affiliates (at GFH). Management sold
their stakes without telling us -- we didn't know, 'Is this your
money or my money?'" said the former GFH executive.
GFH says it has offered stakes in its projects to employees
and board members to align their interests with those of the
investors. "This is a normal practice across all investment
banks," it said.
(Reporting by Frederik Richter and Martin Da Sa'Pinto)
(Created by Sara Ledwith)